Forint Stable, Gov't Bond Rally Continues

14:56 Excitement in the forint market has died down, the currency is stable around 259.

12:46 The forint weakened back to 259 vs. the euro.

The bond market rally

The secondary government bond market remains bubbly, if not so much so as in the last few days, a trader representing a primary market player told Portfolio.hu. According to this trader investors are particularly interested in short-term bonds.

“Overall, bonds are pretty much on the rise," the trader commented on Friday's market sentiment, adding that there are hardly any sellers for 2009 bonds.

According to our interviewee, an upward correction is possible after the recent 200-bp fall, however as this is expected by too many the correction is not likely to be on a major scale. Dropping yields on the short end of the spectrum are definitely a good sign, he added.

12:05 On a steady rise since early morning, the Hungarian currency reached its highest vs. the euro since early November in a sudden rally that started only 12 minutes ago.

The gradual strengthening of the forint is not due to any reasons specific to Hungary, Commerzbank trader Mihály Ötvös told Portfolio.hu. “I assume there may have been stops just below the 259 level that were triggered by the forint gain," he said, adding that the lack of dark clouds looming on global market horizons may have assisted the forint as well. Another possible supporting factor is state revenue from government bond sales.

Ötvös is expecting the parallel movement of emerging market currencies to continue, which means that the significant decline of the South African rand (-2.5% within a single day) does not bode well for the forint.

Compared with last Friday, the Hungarian forint gained 10 units on the euro, an appreciation of nearly 4%. "

Source: Portfolio Online Financial Journal